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Mobile Network Providers - UK - January 2017

“Competition on prices has intensified, post-pay revenues are falling. At the same time, there are signs that customer retention is being eroded, and it has become more difficult to put a premium on greater data allowances. Operators are reacting by trying to foster retention through mobile data flexibility and, in particular, zero-rating (ie waiving data usage for specific apps or services), thus shifting the cost from end users to service providers.”
Sara Ballaben, Senior Technology Analyst

This report covers the following areas:

  • From "free" add-ons to mobile data flexibility
  • Are contracts with a phone at risk?
  • Will e-SIMs put an end to customers' inertia?
  • Can family plans help quad-play operators to build a customer base?

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Table of contents

  1. Overview

    • What you need to know
      • Products covered in this Report
      • Executive Summary

          • The market
            • Market fluctuates slightly as pressure on prices continues to rise
              • Figure 1: Forecast value of retail mobile network connections in the UK, 2011-21
              • Figure 2: Forecast value of retail mobile network connections in the UK, 2011-21
            • Declining post-pay revenues threaten margins…
              • …but data-only connections and sponsored data offer opportunities
                • Figure 3: Average monthly revenue per subscription, by contract type, 2010-15
              • Data-only connections help sustain market volumes
                • Figure 4: Forecast volume of mobile network connections in the UK, 2011-21
                • Figure 5: Forecast volume of mobile network connections in the UK, 2011-21
              • The market should be well insulated from any Brexit-related fallout…
                • …but it could have a huge regulatory effect
                  • Companies and brands
                    • EE is the biggest operator in the market
                      • Figure 6: Retail mobile subscription shares, by provider, Q4 2015
                    • The consumer
                      • The Big Four control majority share of the market
                        • Figure 7: Consumers’ mobile network provider, October 2016
                      • Inertia drives customer retention
                        • Figure 8: Time with current provider on phone used the most, October 2016
                      • Contracts with a phone still the most popular option
                        • Figure 9: Connection type, October 2016
                      • Contract costs are stable while PAYG spend increases
                        • Figure 10: Monthly spend, by connection type, October 2016
                      • Consumers are increasingly data-hungry
                        • Figure 11: Factors that would encourage consumers to switch provider, October 2016
                      • Operators dominate distribution
                        • Figure 12: Place of purchase of SIM card from the Big Four, October 2016
                      • What we think
                      • Issues and Insights

                        • From “free” add-ons to mobile data flexibility
                          • The facts
                            • The implications
                              • Are contracts with a phone at risk?
                                • The facts
                                  • The implications
                                    • Will e-SIMs put an end to customers’ inertia?
                                      • The facts
                                        • The implications
                                          • Can family plans help quad-play operators to build a customer base?
                                            • The facts
                                              • The implications
                                              • The Market – What You Need to Know

                                                • Revenue is stable, but pressure on prices continues to rise
                                                  • Declining post-pay revenues threaten margins
                                                    • Data-only connections help sustain market volumes
                                                      • The potential impact of Brexit
                                                        • Smartphone ownership approaches the 80% mark
                                                        • Market Size, Segmentation and Forecast

                                                          • Market fluctuates slightly as pressure on prices continues to rise
                                                            • Figure 13: Forecast value of retail mobile network connections in the UK, 2011-21
                                                            • Figure 14: Forecast value of retail mobile network connections in the UK, 2011-21
                                                          • Ofcom data reflects better consumer understanding of their data needs
                                                            • Figure 15: Mobile retail revenue, by service (£ billions), 2010-15
                                                          • Declining post-pay revenues threaten margins
                                                            • Data-only connections bolstering overall revenues
                                                              • Figure 16: Average monthly revenue per subscription, by contract type, 2010-15
                                                            • Data-only connections help sustain market volumes
                                                              • Figure 17: Forecast volume of mobile network connections in the UK, 2011-21
                                                              • Figure 18: Forecast volume of mobile network connections in the UK, 2011-21
                                                            • The potential impact of Brexit
                                                              • Introduction
                                                                • The market performed well during the 2008 recession
                                                                  • Smartphones have become a modern-day essential…
                                                                    • …but a slowdown could undermine subscription revenues
                                                                      • Figure 19: Alternative market scenarios for the post-Brexit mobile network providers market, at current prices, 2016-21
                                                                      • Figure 20: Detailed post-Brexit scenarios for the mobile network providers market, at current prices, 2016-21
                                                                    • Forecast methodology
                                                                    • Market Drivers

                                                                      • Smartphone ownership approaches the 80% mark
                                                                        • Figure 21: Personal ownership of smartphones, January 2013-December 2016
                                                                      • Ownership of other smart devices drives data-only connections
                                                                        • The connected home also offers scope for growth
                                                                          • 5G could threaten fixed broadband
                                                                            • Short and live videos to accelerate growth of mobile viewing
                                                                              • Phone usage shifting from fixed line to mobile
                                                                                • Figure 22: Outgoing fixed and mobile voice call volumes, 2010-15
                                                                            • Companies and Brands – What You Need to Know

                                                                              • EE is the biggest operator in the market
                                                                                • Rising adspend reflects market competition
                                                                                  • Quad-play offering grows more competitive
                                                                                    • Operator billing gaining traction
                                                                                      • Google’s Project Fi explores nationwide roaming
                                                                                        • The disruptive potential of virtual operators
                                                                                        • Market Share

                                                                                          • EE is the biggest operator in the market
                                                                                            • Figure 23: Retail mobile subscription shares, by provider, Q4 2015
                                                                                        • Advertising and Promotion

                                                                                          • Rising adspend reflects market competition
                                                                                            • Figure 24: Total above-the-line, online display and direct mail advertising expenditure on mobile network services, by advertiser, December 2014-November 2015 and December 2015-November 2016
                                                                                          • Media mix reflects efforts to maintain brand awareness
                                                                                            • Figure 25: Total above-the-line, online display and direct mail advertising expenditure on mobile network services, by media type, December 2015-November 2016
                                                                                          • Nielsen Ad Intel coverage
                                                                                          • Launch Activity and Innovation

                                                                                            • Quad-play offering grows more competitive
                                                                                              • Virgin Media and BT are also making their pitch for quad-play customers
                                                                                                • Operator billing gaining traction
                                                                                                  • Ofcom hopes Android users will help crowdsource coverage data
                                                                                                    • Google’s Project Fi explores nationwide roaming
                                                                                                    • Brand Research

                                                                                                        • Brand map
                                                                                                          • Figure 26: Attitudes towards and usage of selected brands, December 2016
                                                                                                        • Key brand metrics
                                                                                                          • Figure 27: Key metrics for selected brands, December 2016
                                                                                                        • Brand attitudes: Mobile network providers struggle to instil loyalty
                                                                                                          • Figure 28: Attitudes, by brand, December 2016
                                                                                                        • Brand personality: Virgin Media challenges the Big Four with upbeat image
                                                                                                          • Figure 29: Brand personality – Macro image, December 2016
                                                                                                        • Three and Vodafone struggle to keep up
                                                                                                          • Figure 30: Brand personality – Micro image, December 2016
                                                                                                        • Brand analysis
                                                                                                          • O2’s traditional image might be holding it back
                                                                                                            • Figure 31: User profile of O2, December 2016
                                                                                                          • Virgin Media’s cutting-edge image lets it compete with the Big Four
                                                                                                            • Figure 32: User profile of Virgin Media, December 2016
                                                                                                          • Three’s value-for-money offering fails to combine with other positive attributes
                                                                                                            • Figure 33: User profile of Three, December 2016
                                                                                                          • EE has cool and exclusive image but struggles to build strong identity
                                                                                                            • Figure 34: User profile of EE, December 2016
                                                                                                          • Vodafone’s outdated brand image divides generations
                                                                                                            • Figure 35: User profile of Vodafone, December 2016
                                                                                                        • The Consumer – What You Need to Know

                                                                                                          • The Big Four control majority share of the market
                                                                                                            • Inertia drives customer retention
                                                                                                              • Contracts with a phone still the most popular option
                                                                                                                • Contract costs are stable while PAYG spend increases
                                                                                                                  • Consumers are increasingly data-hungry
                                                                                                                    • Operators dominate distribution
                                                                                                                    • Network Operator

                                                                                                                      • The Big Four dominate the market
                                                                                                                        • Figure 36: Consumers’ mobile network provider, October 2016
                                                                                                                      • Multiple SIMs help consumers get the best of both worlds
                                                                                                                        • Figure 37: Consumers’ mobile network providers (nets), by repertoire of consumers’ mobile network providers, October 2016
                                                                                                                    • Time with Current Provider

                                                                                                                      • The majority have been with their current provider for three or more years
                                                                                                                        • Figure 38: Time with current provider on phone used the most, October 2016
                                                                                                                      • Inertia drives customer retention…
                                                                                                                        • Figure 39: Frequency with which consumers have looked into switching options since they are with their current provider, October 2016
                                                                                                                      • …but contract users are more likely to switch
                                                                                                                      • Type of Connection and Contract Length

                                                                                                                        • Contracts with a phone still the most popular option
                                                                                                                          • Figure 40: Connection type, October 2016
                                                                                                                        • Family plans have potential to build tomorrow’s customer base
                                                                                                                          • Almost half of contract customers are locked for two years
                                                                                                                            • Figure 41: Contract length, October 2016
                                                                                                                          • Contracts will help mitigate post-EU vote price rises…
                                                                                                                            • …but rival payment options could chip away at the market
                                                                                                                            • Connection Cost

                                                                                                                              • Contract costs are stable while PAYG spend increases
                                                                                                                                • Figure 42: Monthly spend, by connection type, October 2016
                                                                                                                              • Converting PAYG customers to contracts: family deals…
                                                                                                                                • …flexibility…
                                                                                                                                  • …and value-added services
                                                                                                                                    • Figure 43: Factors that would encourage consumers to switch provider, by monthly pay-as-you-go and contract spend, October 2016
                                                                                                                                  • Enticing premium contract customers
                                                                                                                                    • Customer service pays at the upper end of the market
                                                                                                                                      • Upgrade programmes also appeal to high-value customers
                                                                                                                                      • Incentives to Switch Provider

                                                                                                                                        • Mobile users more inclined to switch provider
                                                                                                                                          • Figure 44: Repertoire of factors that would encourage consumers to switch provider, December 2015 and October 2016
                                                                                                                                        • Consumers are increasingly data-hungry
                                                                                                                                          • Figure 45: Factors that would encourage consumers to switch provider, October 2016
                                                                                                                                        • Incentivising data allowances
                                                                                                                                          • Building retention through mobile data flexibility
                                                                                                                                            • Zero-rating to advance contextual marketing
                                                                                                                                              • The issue of net neutrality
                                                                                                                                                • The influence of hardware on the choice of service provider
                                                                                                                                                • Channels of Acquisition

                                                                                                                                                  • Operators dominate distribution
                                                                                                                                                    • Figure 46: Place of purchase of SIM card from the Big Four, October 2016
                                                                                                                                                  • Mobile users prefer face-to-face interactions
                                                                                                                                                    • Figure 47: Channel of purchase of current SIM, October 2016
                                                                                                                                                  • Bricks-and-mortar locations key to compete in mobile market
                                                                                                                                                  • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                                                                                      • Abbreviations
                                                                                                                                                        • Consumer research methodology
                                                                                                                                                          • Market size and forecast
                                                                                                                                                            • Fan chart forecast
                                                                                                                                                              • Value
                                                                                                                                                                • Figure 48: Best- and worst-case forecast for the value of the UK’s mobile network providers market, 2016-21
                                                                                                                                                              • Volume
                                                                                                                                                                • Figure 49: Best- and worst-case forecast for the volume of UK’s mobile network providers market, 2016-21
                                                                                                                                                              • Brand research
                                                                                                                                                                • Brand map

                                                                                                                                                                Companies Covered

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                                                                                                                                                                Mobile Network Providers - UK - January 2017

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